chapter 4

1. What is International Business?

• Doing business with other countries through exports, imports, or investments.

• It helps companies reach more customers and make more money, but also comes with risks and challenges.

2. The Rise of Globalization

🌐

Globalization

• The process where businesses and markets become connected worldwide.

• Driven by technology, cheaper transportation, and open trade policies.

📲

Outsourcing

• Hiring people or companies from other countries to do work for cheaper labor or expertise.

3. Imports vs. Exports

4. Exchange Rates 💱

• The value of one country’s money compared to another.

• Affects how much imports and exports cost.

5. Foreign Exchange Control 🏦

• Governments control how much foreign currency is available.

• Can limit or regulate international trade.

6. Types of Advantages in International Trade

🏆

Absolute Advantage

• A country makes a product more efficiently than others.
  → Example: Saudi Arabia with oil.

⚖

Comparative Advantage

• A country makes a product more efficiently compared to another product it could make.
  → Example: U.S. focuses on tech instead of farming.

7. Forms of International Business

8. Why Companies Expand Globally

• Gain more customers

• Get cheaper labor

• Avoid tariffs

• Access resources

• Grow the brand worldwide

9. Barriers to International Trade (New Section)

A. Economic Differences 💰

• In some countries (like China), the government controls the economy more.

• In others (like the U.S.), private businesses have more control.

• Knowing who controls what helps companies plan better.

B. Legal and Political Differences ⚖🏛

Countries have different laws and rules that affect business:

1.

Quotas

• Limits on how much of a product can be imported.

• Makes imported goods more expensive.
  → Example: Only a certain amount of Canadian timber allowed in the U.S.

2.

Embargo

• A complete ban on trade with a country.
  → Example: U.S. embargo on Cuba and North Korea.

3.

Tariffs

• A tax on imported goods.

• Makes imports more expensive so domestic companies are protected.
  → Example: U.S. adds a 127% tax on Chinese paper clips.

4.

Subsidies

• Government gives money to local companies to help them compete.
  → Example: Europe pays farmers so they can compete with U.S. grain.

5.

Protectionism

• When a country protects its local businesses by using tariffs, quotas, or subsidies.

Funny Example:

• EU limited banana imports from Latin America to help Caribbean countries.

• U.S. got mad and taxed Louis Vuitton bags and fancy ham in revenge.

6.

Local Content Laws

• Some countries require part of a product to be made locally.
  → Example: Foreign cars sold in the U.S. must have some U.S.-made parts.

7.

Business Practice Laws

• Every country has its own business rules.
  → Example: Walmart had to change store hours and refund policies in Germany.

• Some countries allow practices that are illegal in the U.S., like:
  

  • Bribery (called “expediting fees” in some places)

  • Cartels (companies working together to control prices)

8.

Dumping

• When a company sells products abroad for cheaper than it costs to make them at home.
  → This is illegal if it hurts local businesses.
  → U.S. fined Japan for selling steel too cheap.

Summary: What Affects Global Business?